EIP is a bank solution in the Philippines that means Easy Investment Plan. The product automatically get money from your savings account and invests it in stocks or funds depending on how aggressive an investor you are. They assess you like how they do when you purchase an investment linked insurance, asking you questions like how much can you invest and what is your risk tolerance?
Stock is a part or share of a company, usually being given to raise capital. Say for example I have a clothing company but little to no money to employ people to make clothes or to purchase raw materials. What I can do is offer part of my company for capital. And when the company starts earning money the profit will be divided equally based on the parts or shares that each person has.
If you're a young professional with little no knowledge in investing, or if you don't have enough savings to invest in Equity Stocks. EIP can be a really great product for you. You get to save the money in a bank and it gets returns higher than the bank's annual rate and chances are you're beating inflation. Truly I say that a hundred invested today is not the same as a hundred invested a year later.
Starting out my career as a young professional two years ago, with minimum living expenses (I live with my parents, and brown paper bag my lunches mostly cause the people I work with have toght schedules and are often too exhausted to drive out for lunch) and earning more than minimum wage, I've decided to brave the market and invest my money. EIP was a fairly new product, I had heard about in a financial seminar from college. (Yes I started working when I was in college.) Now Stock Exchange was really were the money is. Until now its still where the money is.
But there was a challenge to enter the market that EIP has made easy. At the time I have several savings account saved up. I was trained to save money. Being in business school they train you to handle your finances well. I paid attention to my accounting professors. And listened to their advice. I stayed an extra fifteen minutes and chatted with them. Its like getting a consultation, free from experts.
So I set up my EIP to draw momey (I really wanted to allocate as much as I can) each month and for it to be invested. I signed the papers for that money to be injected in my portfolio every month. And I was happy with the investment certificates that I got.
But after I resigned from my job, I had the chance to evaluate my portfolio. By that I meant compare fund performance with several people. And that's when I found out that the money I invested was only making 3%. I was looking at stock performance that was climbing at the time. EIP felt like a safe investment platform. Though it rises and falls like the stock market, it felt like having pooled investors to cushions you from the decline, and when it rises same principle it is still cushioned. You barely feel the ups and downs.
I withdrew my investment and transferred it in stocks. Although the stock market is more scary with its sudden rise and fall the rates are more competitive.
Of course with the recent decline of the stock market a lot of people are worried. But I'm not much worried. As long as I don't pull out my money its all paper loss. And I can make it up after it rises.
For people who are a bit on the safe side, I would recommend sticking with EIP. You have a bank manager to discuss choices with. Its a lot safer than Stock market investing. But if you really want to maximize the returns middle to long term, go for stocks. Invest more than 50% of what you're making (if you can, if you're a young professional like me it would just take a lot of disciple to get you started but once you're in the habit of saving to invest it gets easier.)
Happy investing guys!
Xo,
Paula
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